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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The mechanism for combining production resources - with existing technology - into finished goods and services






2. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






3. Ed = 0 - no response to price change






4. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






6. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






7. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






8. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






9. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






10. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






11. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






12. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






13. The imbalance between limited productive resources and unlimited human wants






14. Es = (%dQs) / (%dPrice)






15. Ei > 1






16. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






18. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






19. Two goods are consumer substitutes if they provide essentially the same utility to consumers






20. The difference between total revenue and total explicit and implicit costs






21. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






22. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






23. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






24. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






25. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






26. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






27. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






28. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






29. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






30. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






31. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






32. 0 < Ei < 1






33. Ed = 8 - infinite change in demand to price change






34. A firm that has market power in the factor market (a wage-setter)






35. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






36. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






37. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






38. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






39. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






40. Entry of new firms shifts the cost curves for all firms downward






41. ATC = TC/Q = AFC + AVC






42. Exists if a producer can produce a good at lower opportunity cost than all other producers






43. The additional cost incurred from the consumption of the next unit of a good or a service






44. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






45. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






46. Entry of new firms shifts the cost curves for all firms upward






47. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






48. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






49. TR = P * Qd






50. Exists at the point where the quantity supplied equals the quantity demanded